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Distribution of the Income of a Private Trust or Company to an Attributable Stakeholder
Income in excess of attributed amount
The income of an entity for an attributable stakeholder is generally assessed on an annual basis from the income tax return. However, if an attributable stakeholder receives income from an entity in excess of the attributed amount, (that is, more than the percentage of the entity attributed to them), the amount of income in excess of the attributable amount is to be treated as income for 12 months from the date of distribution/receipt. The gifting or [glossary:deprivatio:] — [glossary:n provisions:] are to apply to the other stakeholder/s in respect of the excess amount.
Example of income distribution in excess of the attributed amount
Company A has 2 attributable stakeholders, Mervyn and Max. They are each attributed with 50% of the assets and income of the company. Mervyn is in receipt of service pension. The annual tax return indicates that the company recorded an (adjusted net) profit of $15,000 in the previous financial year. Mervyn received $10,000 and Max received $5,000. Mervyn received $2,500 more that his Attribution Income amount in the form of additional Distribution Income. This amount is treated as income for 12 months from the date of receipt/distribution, on top of the $7,500 Attribution Income already attributed to Mervyn.
Income less than attributable amount
If an attributable stakeholder receives income from an entity less than the attributed amount, that is, less than the percentage of the entity income attributed to them, the amount of income less than the attributable amount is to be treated as a gift from the stakeholder and the deprivation provisions are to apply.
Example of income distribution less than the attributed amount
In the previous example Max received $2,500 less than his attributable share of the income of the company. Max is deemed to have 'gifted' the $2,500 and is subject to the deprivation provisions, resulting in him being assessed as having received $7,500 in attribution income and having made a $2,500 gift.
Income from multiple-related entities
If the pensioner is involved in one or more inter-related entities (eg entities with interests in other entities) then the pensioner's interest in each group of inter-related entities is assessed as one interest for the purposes of assessing attribution income and distribution income. The attribution income and distribution income of each individual entity on its own should not be assessed against the pensioner. However should the pensioner be involved with multiple entities with no relationship to, or interest in each other, the attribution income and distribution income to our pensioner from the unrelated entities will be assessed separately.
An entity means any of the following:
a business partnership,
a corporation sole,
a body politic.
According to section 52ZZJ of the VEA, a person is an attributable stakeholder if a company or trust is a controlled private company or trust in relation to the individual unless the Commission determines otherwise.
Financial year, in relation to a company, means:
- a period of 12 months beginning on 1 July, or
- if some other period is the company's tax year that other period.
A reference in section 52ZZH of the VEA, to a group in relation to an individual is a reference to:
- the individual acting alone,
- an associate of the individual acting alone,
- the individual and one or more associates of the individual acting together, or
- 2 or more associates of the individual acting together.